Skip to Main content Skip to Navigation
Preprints, Working Papers, ...

Inventory Management, Dealers' Connections, and Prices in OTC Markets

Abstract : We propose a new model of interdealer trading. Dealers trade together to reduce their inventory holding costs. Core dealers share these costs efficiently and provide liquidity to peripheral dealers, who have heterogeneous access to core dealers. We derive predictions about the effects of peripheral dealers’ connectedness to core dealers and the allocation of aggregate inventories between core and peripheral dealers on the distribution of interdealer prices, the efficiency of interdealer trades, and trading costs for the dealers’ clients. For instance, the dispersion of interdealer prices is higher when fewer peripheral dealers are connected to core dealers or when their aggregate inventory is higher.
Document type :
Preprints, Working Papers, ...
Complete list of metadata
Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Saturday, November 24, 2018 - 3:10:09 PM
Last modification on : Friday, April 29, 2022 - 10:13:03 AM



Links full text



Jean-Edouard Colliard, Thierry Foucault, Peter Hoffmann. Inventory Management, Dealers' Connections, and Prices in OTC Markets. 2018. ⟨hal-01933855⟩



Record views